3 Ways You Can Get Student Loan Debt Forgiven

What happens if all $1.6 trillion of student loan debt?

This is what you need to know.

If the forgiveness of student loans does not occur

Although many student loan borrowers are excited about the prospect of complete student loan forgiveness, there is a good chance that all of your student loan debt not be forgiven. If this is the case, what then? Make sure you have a student loan repayment plan. Here are 3 Real Alternatives to Tax Forgiveness student loans.

1. Enroll in the income-based rebate

Income-based repayment plans reduce monthly federal student loan payments based on discretionary income, family size, and state of residence. The result is short-term financial relief, although interest will accrue on your student loans and your balance will likely be higher. Therefore, the cost of your federal student loans will likely be higher under an income-based repayment plan compared to the standard 10-year repayment plan. The good news is that you can receive student loan forgiveness after 20 years (for undergraduate loans) or 25 years (for graduate loans). Most importantly, you will have to pay income taxes on the remaining balance of the student loan that is forgiven.

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2. Consolidate student loans

Federal student loan consolidation is the process of combining your federal student loans into a new federal student loan called a Direct Consolidation Loan. Think of student loan consolidation as an organizational tool to have one monthly payment, one interest rate, and one student loan server. Only federal student loans (not private student loans) are eligible for direct loan consolidation. It is important that federal student loan consolidation does not lower your interest rate. Rather, it is equal to a weighted average of the interest rates on your existing federal student loans rounded to the nearest 1/8%.

3. File for bankruptcy

It may not be an alternative that you want to hear about, but it may be a viable option depending on your individual circumstances. A Navy veteran was recently discharged on a $221,000 student loan. United States Bankruptcy Judge in New York Cecilia G. Morris has ruled that Kevin J. Rosenberg will not have to pay off his student loan debt because it will impose an undue financial hardship on him. Traditionally, unlike mortgages or credit card debt, the student loan debt cannot be discharged in bankruptcy. There are exceptions, however, if certain conditions are met in relation to financial hardship